ECONOMIC GLOBALIZATION, POVERTY, AND INEQUALITY
Learning Objectives
By the end of this section, you will be able to:
Describe the modernization and dependency theory perspectives on global stratification
The Swedish statistician Hans Rosling once said, "The 1 to 2 billion poorest in the world who
don't have food for the day suffer from the worst decease, globalization deficiency. The way
globalization is occurring could be much better, but the worst thing is not being part of it."
Economic and trade globalization is the result of companies trying to outmaneuver their
competitors. While you search for the cheapest to buy shoes, companies search for the
cheapest place to make those shoes. They find the cheapest sources of leather, dye, rubber,
and of course labor. The result is that labor- intensive products like shoes are often produced in
countries with the lowest wages and the wages and the weakest regulations. This process
creates winners and losers. The winners include corporation and their shareholders who earn
more profit. They also include consumer who get products at a cheaper price. The loser are
high wage workers who used to make those shoes. Their jobs moved overseas. But what about
the low wage foreign workers? Are they winning or losing? A lot of workers are thrown into
hazardous working conditions but it is also that many workers in developing countries are at
least making more money. These job pays above average wages. People want these jobs and
although the pay would be unacceptable in developed countries, they are often the best
alternative.
The multiplier effect means an increase in one economic activity can lead to an increase in
other economic activities. For instance, investing in local business will lead to more jobs and
more income. According to the economist Paul Krugman (as cited in The New York Times, July
18, 2013), "The Bangladesh apparel industry is going to consist of what we would consider
sweatshops or it won't exist at all. And Bangladesh, in particular, really needs it's apparel
industry. It's pretty much the only thing keeping it's economy afloat."
Not everyone agrees to this. Opponents of economic globalization called the outsourcing of
jobs as exploitation and oppression, a form of economic colonialism that's puts process before
people. A few call for protectionists process like higher tariffs and limitations on outsourcing.
Others focus on the foreign workers themselves by demanding they receive higher wages and
more protection. The root of many arguments against economic globalization is that companies
do not have to follow the same rules they do in developed countries. Some developing
countries have no minimum wage laws. They do not have regulations that provide safe working
conditions or protect the environment. Although nearly every country bans child labor, those
laws are not always enforced.
In the absence of regulations, it is still possible that workers would not be horridly mistreated.
First, public awareness is growing along with the pressure from the international community to
take steps to protect workers. For example, the United States produces an animal publication
called the list of good produced by child labor or forced labor. If a company is buying buying
products from the list, they are likely to be blasted by official and the media. So, the awareness
is the first step to improvement. The second step comes from those that support globalization.
The pro-globalization set argues that as developing economies grow, there are more
opportunities for workers which leads to more competition for labor and higher wages.
Economic globalization has helped millions of people get out of extreme poverty but the
challenge of the future is to lift up the poor while at the same time keep the planet livable. One
of the best ways to help those in extreme poverty is to unable them to participate in the
community. This applies to the developing countries in the global market place and to
individuals at the local level. A perfect example is microcredit. In 2006, a Bangladeshi professor
named Muhammad Yunus won the Nobel Peace Price for implementing a simple idea. He give
small loan's, on average around $100, to low -income people in rural areas. The borrowers, who
are mostly female, often used the money to fund plans that could raise their income. For
example, they started small business. Microsoft was a success and has since spread to
developing countries throughout the world. Private lenders, governments, and non profit
organizations have jumped on board to loans billions of dollars to the world's most
disadvantaged.
By itself, microcredit is not going to solve the problem of extreme poverty but it support the
idea that enabling people to participate in the in the economy can make their lives better.
Yunus (2012) explained, "In my experience, poor people are the world's greatest
entrepreneurs. Every day they must innovative in order to survive. They remain poor because
they do not have the opportunities to turn their creativity into sustainable income."
Microcredit, when it works, allows people to improve their lives by participating in the global
economy are not doing it on their own terms. Many of the people who have emerged from
extreme poverty in the last 25 years have jobs, wages, and working conditions that would be
unthinkable in the developed world. Economy said that it is all right but it is progress that is
very hard to achieve.
Global Income Inequality
Globalization and inequality are closely related. We can see how different nations are divided
between the North and the South, developed and less developed, and the core and the
periphery. These differences mainly reflect one key aspect of inequality in the contemporary
world--global economic inequality. There are two main types of economic inequality: wealth
inequality and income inequality. Wealth to refes to the net worth of a country. It takes into
account all the assets of the nation--may be natural, physical, and human--less the liabilities. In
other words wealth is the abundance of resources in a specific country. This means that wealth
inequality speaks about distribution of assets. However, there is no widely recognize, monetary
measures that sums up these assets (Economist, 2012).
In order to measure global economic inequality, economists usually look at income using Gross
Domestic Product (GDP) , incomes is the new earnings thatare constantly being added to the
pile of countrie's wealth. When we talked about some income inequality, we mean that the
new earnings are being distributed; it value's that flow of goods and services not the stock of
assets (Economists, 2012).
Let as look at both types of inequality in the global level. According to the Global Wealth Report
2016 but the Credit Suisse Research Institute, global wealth today is estimated to be about 3-5
trillions and it is not distributed equally Countries like the United States and Japan where able
to increase their wealth. Due to currency depreciation, however, the United Kingdom had a
significant dicline. Furthermore, the report showed that income inequality continues to rise.
"While the bottom half collectively own less than 1 percent of total wealth, the wealthiest top
to 10 percent own 89 of all global assets" (Credit Suisse Research Institute, 2016).
Branko Milanovic (2011), an economist who specializes in global inequality, explained all this
by describing an "economic big bang" wherein the industrial Revolution caused the differences
among countries. Through this "explosion" of industry and modern technology, some nation's
became economically developed while others were developing. Ultimately, the result is the
economic gap among countries. The gab between the richest and the poorest nations are
greater today than the past. For instance, back in 1820, the great Britain and the Netherlands
were only three times richer than India and China, but today the ratio 100:1 (Milanovic, 2011).
Although it is the industrial Revolution that allowed a significant inequality in the past,
economic globalization and international trade are the forces responsible in today's global
Income inequality. Many economist believe that the world's poorest people gained something
from globalization. The rich on the other hand, earned a lot more. Harvard economist Richard
Freeman (2011), noted "The triumph of globalization and market capitalism has improved living
standards for billions while concentrating billions among the few"(as presented in OECD policy
forum, Paris, May 2). In other words, the poor are doing a little better and the rich are
becoming richer due to global capitalism.
Access to technology also contributed to worldwide income inequality. It complemented skilled
workers but replaced many unskilled workers. In modernized economies, jobs are more
technology-based, generally requiring new skills. This is what economist to as skill-based
technological change. As a result, workers who are more educated and more skilled would
thrive in those jobs by receiving their higher wages. On the other hand, the unskilled workers
will fall behind. They will be lift or overtaken by machines or more skilled workers. In addition,
manufacturing jobs that require low skills are move overseas. The result is a widening gap
between the rich and the poor as well as between high-skilled and low-skilled workers.
The Third World and the Global South
You probably heard of "First World Problems." When someone crack's the screen on their
phone or gets the wrong order at the coffee shop, and then goes on to their phone or gets on
to their social media accounts, you might see their complaints with a hashtag "First World
Problem." What are the implications of talking about countries as First or Third? Where did
these terms come from? These terms are outdated and inaccurate ways of talking about global
stratification. How then are we going to talk about global stratification.
Let's us begin by deconstructing the idea of the First, Second, and Third World hierarchy by
looking at their origins and their implications. The terms date back to the Cold War, when
Western policy makers began talking about the world as three distinct political and economic
blocks (Tomlinson, 2003). Western capitalist countries were labeled as the "First World". The
Soviet Union and it's allies were termed the"Second World". Everyone else was grouped into
"Third World". After the Cold War ended, the category of Second World countries become null
and void, but somehow the terms "First World" and "Third World" stuck around in the public
consciousness. Third World countries, which started as just a vague catchall term for non-
alliance countries, came to be associated with impoverished states, while the First World was
associated with rich, industrialized countries.
In addition to being outdated, these terms are also inaccurate. Ther are more than 100
countries that fit the label of "Third World," but they have vastly different of economic stability.
Some are relatively poor, but many are not. For example, lumping Botswana and Rwanda into
the same category does not make much sense because the average income per capita in
Botswana is nine times larger than in Rwanda. Nowadays, social scientists sort countries into
groups based on their specific levels of economic productivity. To do these, they use the Gross
Domestic Product (GDP) which measure the total output of a country, and the Gross National
Income (GNI), which measure GDP per capita (World Bank, n.d).
A new and simpler classification, North-South, was created as Second World countries joined
either the First World or the Third World. First World countries, such as the United States,
Canada, Western Europe, and develop parts of Asia are regarded as the "Global North" while
the "Global South" includes the Caribbean, Latin America, South America, Africa, and parts of
Asia. These countries were used to be called the Third World during the Cold War (Reuveny and
Thompson, 2007). By noting that countries are south of 30 degrees north latitude they are able
to say that these areas share common problems and issues having to do with economy and
politics. The terms "Global North" and "Global South" are a way for countries in the South to
make a stand about the common issues, problems, and aven causes in order to have equality all
throughout the world.
This distinction points largely to racial inequality, specifically between the Black and the White.
According to Ritzer (2015), " At the global level, whites are disproportionately in the dominant
North, while blacks are primarily in the South, although this is changing with South-to-North
migration" (p.266). In other words the difference between the Global North and the Global
South are shaped by migration and globalization. Nevertheless, the economic differences
between the wealthy Global North and poor Global South "have always possessed a racial
character" (Winant, 2001, p.131).
Global City
The rural-urban differentiation has a significant relationship to globalization. Globalization has a
deeply altered North-South relations in agriculture. For instance, the relations of agricultural
production have been altered due to the rise of global agri-business and factory farms
(McMichael, 2007). In this scenario, the South produces non-traditional products for export
and become increasingly dependent on industrialized food export from the North.
Consequently, this leads to replacement of the diet as well as the displacement of local farmers.
Schlosser (2005) pointed out that as commercial agriculture replaces local provisioning, the
relations of social production are also altered. Rural economies are exposed to low prices and
mass migration.
Sassen (1991) used the concept of global cities to describe the three urban centers of New
York, London, and Tokyo as economic centers that exert control over the world's political
economy. World cities are categorized as such based on the global reach of global organization
found in them. Not only are there inequalities between those cities (Beaverstock et al.,2002).
Alternatively, following Castells (2000), these cities can be seen as important nodes in a variety
of global networks.
Although cities are major beneficiaries of globalization, Bauman(2003) claimed that they are
also the most severely affected by global problems. Therefore, the city faces peculiar political
problems, wherein it is often fruitlessly seeking to deal locally with global problems and "local
politics has become hopelessly overloaded"(p.102).
